When I first proposed writing a critique of the welfare state, my publisher screamed at me: "You can't believe that!" It took 11 years to find a publisher willing to commission it, most of them being appalled by the ideas in it. When, finally, The Welfare State We're In came out, in 2004, I was slightly disappointed by how little attention it got. But since then interest in the book has grown: it seems to have progressed from being regarded as "mad and bad" to "controversial".

This seems like progress of a sort. I could be wrong, but I sense that the welfare state is like a religion in which faith is no longer quite so firm as it once was. People generally still pay it respect and regard anything said against it as sacrilege. But genuine conviction that the welfare state has been a terrific success is getting to be rare.

One key reason for the fading of true belief has, perhaps, been widening knowledge of how the performance of the NHS compares with healthcare in other countries. Some of the most persuasive information have been data on the proportions of people surviving cancer. Those diagnosed with lung cancers, for example, are more than a third more likely to be alive a year later if they reside in Germany rather than England. They are twice as likely to survive if they live in France. Similar figures apply to most of the cancers.

Of course, the government is hoping that all this will change because of the extra money being thrust into the NHS. But the slow rate at which Britain takes up important new cancer drugs suggests that Britain's persistence with this state monopoly system will result in some 10,000 deaths each year of people who would not do so if our healthcare was delivered by a different system. Meanwhile, repeated news of deficits and redundancies in NHS trusts is undermining faith in the reform programme.

Confidence in our schools is also being chipped away. Television programmes such as Channel 4's That'll Teach 'Em have put it in the minds of people that better behaviour and higher standards were expected in previous decades. The government asserts that improving exam results reflects genuinely rising standards. But people doubt it, and studies have shown that while exam results have improved, standards have declined. After 88 years of free, state-provided primary education, one in five adults in Britain is "functionally illiterate" - a dreadful condemnation.

The mess that governments have made of welfare benefits is more widely understood, too. The current administration now admits that more than a million people claiming incapacity benefit are, in fact, capable of work. The longer-term story is woeful: national unemployment insurance was introduced in 1911. Only since then has mass unemployment become a permanent feature of our society.

Some of the ways the welfare state failed or bungled are beginning to be recognised. But most people still resist admitting the full extent of it, and they have not yet begun to think there may be connections between the welfare state and other worrying aspects of how our society has changed, such as the brutalisation and criminalisation of Britain, and the rise in divorces and multiplication of births outside marriage.

Britain remains in denial about the true, extraordinary extent of the failure of the welfare state.

· James Bartholomew is Earhart Foundation senior fellow in social policy at the Institute of Economic Affairs.

· An updated edition of The Welfare State We're In is published this week by Politico's Publishing, RRP £12.99.